Londons AIM market has a reputation for being a risky place to invest, and for good reason you have to be extremely careful where you invest in this highly speculative market. AIM is designed for small companies in the early stages of their lives, and most of these businesses are highly speculative as a result.
Nonetheless, there are some bargains on AIM that could yield lucrative returns for investors, although singling out these opportunities is tough.W Resources (LSE: WRES),Xtract Resources (LSE: XTR) andVictoria Oil & Gas (LSE: VOG) all look as if they have bright futures, but if you had to pick just one, which should you choose?
W Resources is a tungsten production, exploration and development companythat owns four mines in Spain and Portugal, two of which are being fast-tracked to begin production within the next two years. W Resources is targeting production from the La Parrilla Mine in Spain during 2016, and production from the Rgua mine in Portugal during 2017. The company received development approval for its La Parrilla mine earlier this week, so management is confident of hitting the target for initial production next year. When in production, La Parrilla andRgua are expected to have some of the lowest production costs fortungsten in the world. Furthermore, W Resources is targeting revenue of $90m per annum by 2018.
Xtract Resources has the potential to become one of the worlds premier small-cap gold producers. The company has made staggering progress over the past year improving its prospects, and during September the company acquired the Fair Bride gold project, jacking up Xtracts resource base to over 1m ounces of gold. However, Xtracts key advantage is the fact that the companys cost of production is around $650 per ounce of gold, making it one of the worlds lowest cost gold producers. Gold production is expected to double over the next year and the company recently received a boost from itsChepica Gold and Copper Mine in Chile, which reportedrevenue growth of 153% to $448k and profit growth of 186% to $150k for the third quarter.
Victoria Oil & Gas has made solid progress on its strategic goals this year. The companys gas sales nearly tripled year-on-year over the nine months to the end of September, and gas productiondoubled during the third quarter. Also, Victoria is planning more drilling activity during 2016, which should see gas production and sales increase further. During the third quarter, group gas production reached an all-time high of15.2mstandard cubic feet per day. And Victoria is cash-rich, which is rare for such a small player in the world of oil and gas. At the end of the third quarter the company had $12.8m of cash, down from $14.2m as reported at the end of the second quarter, but the companyreduced debt by $2.4m during the period. In other words, cash generated for the three months to the end of September was around $1m.
Overall, as Victoria is the only company in this piece thats cash-rich and generating cash, it looks as if Victoria is the AIM champion that should take a place in your portfolio.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.